CBIRC Calls for Greater Pressure on China’s Shadow Banking Sector Following 4 Trillion Yuan Increase in 2020

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The China Banking and Insurance Regulatory Commission (CBIRC) has just flagged a heavier crackdown on the country’s 90 trillion yuan (approx. USD$12.9 trillion) shadow banking sector following a sizeable expansion since the start of the year.

CBIRC recently issued the “Circular Concerning Major Problems Uncovered by Regulatory Inspection of Shadow Banking and Cross-Financial Sector Operations over Recent Years”(关于近年影子银行和交叉金融业务监管检查发现主要问题的通报) to both its local offices and banking and insurance institutions.

According to the Circular shadow banking problems in China are primarily concentrated in areas including:

  • Improper execution of new asset management and wealth management regulations;
  • Insufficient separation of operating risk;
  • Inadequate regulation and control of irregular investment operations;
  • Illicit flows of funds into the sharemarket.

CBIRC called for regulatory agencies at all levels to “persevere in striking against illegal and illicit behaviour that emerges in shadow banking and cross-financial sector operations, promptly adopt regulatory measures against banking and insurance institutions that fail to vigorously implement the demands of the Circular, and firmly prevent the re-emergence of shadow banking and the revival of structurally complex products.”

“There are no new regulatory requirements in the Circular, so all requirements made are a re-statement and emphasis of existing regulatory provisions,” said an official from CBIRC at a press conference held on 14 July.

On 10 July Ruan Jianhong (阮健弘), head of the Chinese central bank’s statistical department, said that regulators currently covered eight major forms of shadow banking in their statistical system including:

  1. Bank wealth management products without principal guarantees;
  2. Trust company asset management products;
  3. Asset management products of securities companies and their subsidiaries
  4. Specialist accounts of fund management companies and their subsidiaries;
  5. Asset management products of futures companies and their subsidiaries;
  6. Insurance asset management products;
  7. Asset management products of financial asset investment companies;
  8. Publicly offered funds.

“As of the end of May this year, the total assets of these directly reported asset management products were 90.1 trillion yuan (approx. USD$12.9 trillion), for an increase of 4 trillion yuan compared to the start of the year,” said Ruan.

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